The FCA has imposed a £13 million fine on the London branch of Macquarie Bank due to “serious failings” that enabled an employee to record over 400 fictitious trades.
Between June 2020 and February 2022, trader Travis Klein managed to log and conceal these fictitious trades in Macquarie’s internal systems to mask his losses. The FCA noted that these trades escaped detection due to “significant weaknesses” in the bank’s systems and controls, which the firm had been made aware of previously. Klein was able to evade detection from three key internal controls for more than 20 months.
The fictitious trades resulted in an estimated cost of $57.8 million for Macquarie to unwind, although they did not impact customers or the market as a whole. In addition to fining the bank, the FCA has banned Klein from the financial services industry for dishonest and unprincipled conduct, but he was spared a fine due to his serious financial hardship.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, stated, “MBL’s ineffective systems and controls allowed an employee to hide trading losses that ultimately cost the firm millions to resolve. This should serve as a cautionary tale for those we regulate; risks can originate internally. It is crucial to have the right systems in place to identify and address them promptly.”